Wheaton College Norton, Massachusetts
Wheaton College
Gift Planning

Giving

Retirement Assets

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A gift of retirement plan assets can be a surprisingly easy way to reduce potentially very high taxes and provide support to Wheaton College.

A gift of retirement plan assets could be right for you if:

  • You have an IRA or qualified retirement plan, such as a 401(k) or 403(b).
  • You do not expect to use all of your retirement plan assets during your lifetime.
  • You have other assets, such as securities and real estate, that you want to pass to heirs.
  • You may want to provide payments to loved ones after you are gone.
  • You would like to make a bequest gift to Wheaton.

Option 1: Make a tax-free gift with an IRA charitable rollover (New as of 12/18/15)

You can make a tax-free gift from your traditional IRA (other qualified retirement plans such as 401(k)s and 403(b)s are not eligible). You must be at least 70 ½ years old to take advantage of this opportunity. You must transfer your gift directly from your IRA administrator to Wheaton College. The total of all of your rollover gifts in any one year cannot exceed $100,000 per person. A spouse with a separate IRA could also make a rollover gift of up to $100,000 if they otherwise qualify.

The benefits of an IRA charitable rollover gift include:

  1. Satisfies the required minimum distribution but is not included in taxable income
  2. Avoids income tax on IRA withdrawals
  3. Supports the important work of Wheaton with a tax-free gift

Option 2: Designate remaining retirement plan assets for Wheaton College

You designate on your IRA or qualified plan beneficiary designation form the beneficiary of all or a portion of what remains in your retirement plan when the plan ends.

In addition to having the satisfaction of making a significant gift to Wheaton, your benefits include:

  1. Savings on federal and state taxes that can total 39.6% or more.
  2. Preservation of non-retirement plan assets for family.

Option 3: Designate remaining retirement plan assets for a life income plan

You can designate on your IRA or qualified plan beneficiary designation form that the assets remaining when your plan ends be used to fund a gift arrangement that will make payments to family members or other loved ones for the rest of their lives. When the gift arrangement ends, what's left goes to Wheaton College.

In addition to having the satisfaction of making a significant gift to Wheaton, your benefits include:

  1. Save federal and state taxes
  2. Preserve non-retirement plan assets for family
  3. Provide payments to family or other loved ones for life

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IRAs and qualified retirement plans
Retirement plan assets are a major source of wealth for many households. For example, you may have hundreds of thousands of dollars invested in your IRA, 401(k), 403(b), or other qualified retirement plan. These plans do not pay tax on the income they earn. This allows their assets to grow faster than if you held and invested these assets yourself.

The primary purpose of your retirement plan is to provide you with income during your retirement, but it can also be an excellent source of funds for making charitable gifts when your plan ends.

Taxes on remaining retirement assets can be very high
Your family members and other heirs will have to pay income tax on any distributions they receive from your retirement plan after you are gone. In addition, if your estate is large enough to owe estate tax, it will also pay estate tax on these distributions.

Federal income tax alone can be 39.6%. When you add federal income tax and estate tax together, they can total 64% or more. In states that assess their own taxes on estates, the total taxes on retirement plan assets paid to heirs can be over 64%.

Give retirement plan assets to Wheaton College and save taxes

In contrast to your retirement plan assets, most other assets in your estate will not be subject to income tax on top of estate tax. As a result, your estate and heirs will pay lower taxes if you pass these other assets to your heirs, and give your retirement plan assets to charity. Paying lower taxes will mean that more assets will reach your heirs. How much more will depend on the size of your estate, where you live, and the type of gift you make, but your savings will typically be tens of thousands of dollars on a $100,000 gift.

How do I pass retirement plan assets to Wheaton? 
You have several good options for passing your retirement plan assets to us.

Outright
The simplest and most common way to give retirement plan assets to is to make our organization a designated beneficiary of your retirement plan. All you need to do is to tell the administrator of your retirement plan to designate our organization as a beneficiary of your plan and name the percentage of your remaining assets that you want us to receive. The retirement plan assets that you designate for us will avoid all income tax and estate tax. In order for your estate to enjoy both of these tax benefits, it is very important that you make our organization the designated beneficiary of these retirement plan assets, not your estate. Please identify us on the form as:

Legal name: Wheaton College, Norton, Mass.

Life income plan
Another option for passing retirement plan assets to us is through a life income plan. Passing assets to us through a life income plan allows you to provide income to your loved ones after you are gone and then provide support to us. Such a plan strikes a balance between leaving all of your retirement plan assets to loved ones and paying maximum taxes and leaving all of these assets to us and eliminating taxes on them altogether. Here's how a life income plan works:

  • Your retirement plan transfers the designated portion of its final balance to the life income plan. 
  • The heirs you have chosen receive payments from the plan each year, typically for life. 
  • When the life income plan ends, its remaining principal goes to support Wheaton College.

Using retirement plan assets to fund a life income plan postpones income tax and reduces estate tax on these assets. A typical result is to reduce total taxes on your retirement assets by more than half compared to distributing them to your heirs through your estate.

Life income plan options 
There are several life income plan options to choose from. The one that is right for you will depend on a variety of factors. Please contact us if you would like to learn more about funding a life income plan with assets from your retirement plan.

Example

Jane Henderson, 75, is a retired business executive who has accumulated $500,000 in the retirement plan that she set up through her company years ago. She takes minimum distributions from her plan in order to preserve as much tax-free growth inside the plan as she can. At this rate, she expects that her account may still be worth $500,000 when she dies.

Jane has reached the time in her life when she has begun thinking about the legacies she wants to leave behind after she is gone. She decides to leave a bequest to Wheaton College to create an endowed fund that will perpetuate generous support in her name. To accomplish her goals, she designates 40% of the final balance in her retirement account for Wheaton College.

Benefits

  • There will be no income tax or estate tax on the $200,000 of Jane's retirement plan assets that are transferred to Wheaton. If Jane were to pass the same amount to her family and make her charitable gift with stock instead, her family would owe income tax of $79,200 (39.6% bracket) on the IRA assets, leaving only about $120,800 remaining for their own use. There would be even greater tax savings if Jane's estate was large enough to pay estate tax. 
  • Jane has the immediate satisfaction of knowing that she has put a gift plan in place that will keep her name alive and support Wheaton College long after she is gone.
  • Jane will become a member of Founders Society.